Unfortunately, many business owners facing current recession are worried more about their revenue growth than about their cash flow!
What processes do you have in place and how do you deal with customers who pay their bills late or not at all?
It is a problem faced by virtually every business. Accounts not paid within terms can severely impact the cash flow of a business. A clearly defined and carefully communicated, yet diplomatic payment policy, is a virtual part of running a successful business while retaining a good professional relationship with your customers.
These 10 simple steps can dramatically improve your results:
- Have a defined credit policy
Make sure that your business’s terms of payment are clearly stated in writing to each customer.
- Invoice promptly and send statements regularly.
- Use “address service requested”
Print or stamp on the envelop just below your business return address. USPS will locate a change of address and send you a form # 3547 with the correct address for a small fee. Do not only rely on e-mail statements!
- Contact overdue accounts more frequently: Sent past due notices and follow up with phone calls in a tight cycle of 5-7 business days in a 1-2 months time frame.
- Use your aging sheet not your feelings
Many businesses have let an account age beyond the point of ever being collected because he or she “felt” the customer would pay eventually or they don’t want to upset the customer. While there certainly are isolated cases of unusual situations, the truth is that if your business isn’t being paid, someone else probably is. You are not on their priority list!
- Make sure your staff is trained
Make sure your staff is firm, yet courteous when dealing with debtors. Does your business accept credit cards? If not talk to a merchant! If you have a debtor on the phone, try to get a credit card payment there and then. Promised checks might never be mailed.
- Admit and correct any mistakes on your part
- Follow the collection laws in your state
In many states, businesses are governed by the same collection laws, as are collection agencies.
- Use a third party earlier
The time and financial resources budgeted for internal collection efforts should be focused within the first 60-90 days when the bulk of accounts can and should be collected.
- Remember that nobody collects every account
Sibylle Hauser is a Profit Recovery Specialist at Transworld Systems, Inc. If you have questions, you may contact her via email.